Whilst I am not into short term scaremongering or in the habit of publishing “doom and gloom” messages, it is interesting to see the most immediate effect the Brexit vote is having within the IT sector and on those involved with making decisions on technology in the coming months.
On Friday 21st October, Microsoft released the news of changes to pricing for volume licensing products via its UK TechNet blog for IT professionals — saying it was revising pricing in pound sterling to “ensure there is reasonable alignment across the region”. On-premise enterprise software prices will be rising by 13 per cent, while “most” enterprise cloud prices in British pounds will increase by 22 per cent to — in Microsoft’s words — “realign close to euro levels”.
Whilst not attributing this hike directly to the Brexit vote, it does not go unnoticed that similar price increases were bestowed on Norway and Switzerland earlier in 2016 and classified the price change as “harmonisation adjustment”.
According to an article published by Paul Kunert on the e-newsletter from The Channel: http://www.channelregister.co.uk/2016/10/24/microsoft_price_rises/
Cloud pricing was to rise in the UK by 22% and on premise by 13% with the price rise starting on the 1st January 2017. He cited “Microsoft said “sustained currency changes” had led to “price misalignment” of the Brit pound, “this [price] change is an outcome of periodic assessment and will realign British pound prices close to euro levels”.
This is quite significant as Microsoft’s licensing allows for an increase based on currency fluctuation during the agreement period which may impede a true ROI from the outset, which translate to me into a variable or fluctuating price during the life cycle of the service.
Microsoft are not alone in this pricing readjustment, in July of this year, Dell announced a double digit price increase across its UK product portfolio and blamed a Brexit-induced sterling meltdown.
This is hardly surprising with the Euro appreciating more than 21 per cent since November 2015 when £1 equated to €1.42, and by nearly 14 per cent since the EU referendum, £1 is now worth €1.12. The pound was worth $1.50 on 30th November 2015 and at the end of October 2016 was down to $1.21 with analysts predicting Sterling will hit parity with the euro and drop to just $1.10 by the end of 2017.
So how can you try to safeguard future IT spend or gain best value for money when considering a return on investment?
Certainly there are continued advantages of migrating to cloud based services and using a PaaS (Platform as a Service) strategy should not be excluded from your thoughts but the key may sit in selecting a vendor that can offer fixed term pricing over say a 36 month period at a rate that is either directly in sterling or is fixed against the currency at time of purchase.
Even with the decreasing value of the pound, at least a stable payment option ensures that the financial implication of your decision stays constant; given that user numbers stay the same.
Many of our prospective customers are going through this due diligence exercise with current IT purchases looking toward PaaS as part of a move away from on premise IT solutions. The success of using applications such as ServiceNow for enterprise self-service business services and Salesforce.com for CRM has made clients less likely to want to own software and consider outsourcing their software licensing to a SaaS (Software as a Service) and some are considering outsourcing their entire IT infrastructure as a service as a viable alternative to regular intervals of hardware and software acquisitions ( large chunks of capital expenditure)
With our work in supporting clients selecting the correct ITOM (Information Technology Operations Management) and Enterprise self-service options, we have taken advantage of using the customer focused licensing flexibility from ServiceNow and combined this with our fixed cost Virtual IT support to give our clients a 100% transparent cost structure and peace of mind against future currency fluctuations and price changes for the duration of a contract.
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